2.1.4 Planning

Question 1

what is business plan

Answer 1

document which sets out the future plans for a business
how owner explains how turn idea into succesful business
–> to bank or investor

Question 1

why business plan

Answer 1

persuade lenders that business will make enough profit to pay back
attract potential investors
give direction
set targets and objectives that can be followed (SMART)
identify early on problem areas
monitor effectiveness
help decide what recourses are needed
help negotiate lower percentage to VC ot angel investor

Question 2

what does a businesss plan include

Answer 2

name of business
product service and market it is aimed at
human recourses: who will work there, manager, owner
production costs + potential supplier
premisis and how it will be financed (rent, lease)
4 Ps of Marketing (product, price, place, promotion)
financial information: projections on revenue, costs, profits, cash flow forecast, budget, sales forecast, balance sheet

Question 3

what is a cash flow forecast

Answer 3

=day-to-day running a business budget
=forecast of cash leaving and entering a usiness
shows where business will have shortfall
allows business to organize short-term cash borrowing to cover shortfall (overdraft)
out > in shortfall; in > out surplus

Question 4

cash inflow/outflow

Answer 4

cash into business at top of cashflow –> called income
cash out of business is cash that is being spend –> called expenditure
(opening balance is closing balance of next month + is a forecast so currently in month before)

Question 5

uses of cash low forecast

Answer 5

help control and monitor cash in and out of business
–> make comparisons
–> shows cash shortfalls –> business can arrange suitable finance
secure better deal on finance

Question 6

limitation cash flow forecast

Answer 6

only snapshot –< short time to make concrete decisions about business
only forecast (external shock)
not about profit –> only about cash in the business to meet short term debts
no full picture of business
very risky for owner to make decisions on this

Question 7

limitations of business plan

Answer 7

Unpredictable Market Conditions: due to economic shifts, consumer behavior, or competitor actions, –> less reliable over time

Assumptions May Be Inaccurate

External Factors: beyond a company’s control and may disrupt the original plan, making it difficult to achieve initial goals

Resource Constraints: Limited financial resources or access to capital can prevent the business from executing the plan as envisioned, causing delays or forcing adjustments to the strategy.

Rapid advancements in technology may make certain aspects of a business plan obsolete or require costly adaptations, as businesses must keep up with innovation to stay competitive

overly optimistic projections or overly ambitious goals,–> unrealistic expectations that may not be achievable

created at a specific point in time, but conditions may evolve quickly, –> plan outdated if not regularly revised to adapt to new circumstances.